SoftBank’s Big Bet on WeWork Could Turn Sour: Term Sheet

WeWork’s decisions ahead of its initial public offering have far-reaching effects.

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WeWork’s decisions ahead of its initial public offering have far-reaching effects.

As the co-working behemoth contemplates listing on the public markets at a far lower valuation that previously expected, its biggest backer⁠—SoftBank—is bracing for a potentially staggering loss. This is a stark reminder of the risks of an investing strategy that inflated startup valuations across Silicon Valley.

SoftBank has a roughly 29% stake in the We, the parent company of WeWork, said one executive at an analyst call on Wednesday, after the company plowed a total of $10.65 billion into the startup. The Tokyo conglomerate’s massive stake is a vote of confidence in the unprofitable company, which lost about $1.61 billion last year.

Yesterday, we noted that WeWork was reportedly considering seeking a valuation of about $20 to $30 billion in its IPO. Those figures would mark a significant decline from the $47 billion valuation WeWork achieved this year thanks to an investment from SoftBank. The New York-based company is now said to be considering a market debut at just $20 to $30 billion, fueling tensions among SoftBank employees.

From Fortune:

The WeWork IPO comes at a critical time for SoftBank, which is currently trying to convince investors to bankroll a second $108 billion iteration of its Vision Fund. The company is already mopping up the fallout from another poorly performing IPO. SoftBank put $7.7 billion into Uber, whose market value promptly fell after shares listed publicly at $45 in May. That price has since fallen to about $35, well below the price SoftBank paid for part of its stake.

Some staffers at the Vision Fund are now concerned that WeWork’s valuation could fall further, to even below $20 billion—the valuation of SoftBank’s original investment made by the Vision Fund,according to people familiar with the company who asked not to be identified discussing private matters. Because the Vision Fund is so exposed to WeWork, it will play a substantial role in compensation for employees of the fund. People at the Vision Fund are not paid on a deal-by-deal basis, as with some other venture firms. Vision Fund employees, including high-profile bankers and investors, receive base salaries and bonuses, but only get payouts when profits are booked. They are also on the hook for potential losses, facing clawbacks of 20% and above for some senior staff, and 7% for more junior employees.

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NEW UNICORN: Getaround, a San Francisco-based used car marketplace, is a freshly minted unicorn. The company raised approximately $200 million in funding at a valuation of $1.7 billion, according to Pitchbook. In total, Getaround has amassed more than $400 million in total funding from investors including SoftBank, GV, Madrona Venture Group and Ashton Kutcher.

TWO FUN THINGS: Since it’s Friday, I wanted to share two things I found amusing this week.

1. Crypto Rap Battle: Greylock’s Reid Hoffman has invested in crypto-focused companies including Coinbase, Xapo, and Blockstream. In a LinkedIn post, Hoffman explained that he is interested in cryptocurrency as an asset, a currency, and a platform.

So he helped produce a Hamilton-inspired rap battle video about the cryptocurrency debate. Like I told my colleague, I really thought I wasn’t going to like this, but it’s actually really good. Watch the rap battle video here.

2. The Billion-Dollar Major: If you went (or plan to go to Stanford), you’ll enjoy this “How to Major in Unicorn” article. It’s a “cynic’s guide to killing it at Stanford.” (As someone who went to a public school in the South, I had literally not a single time thought about “venture capital” in the entirety of my four years, but props to you guys for starting early.)

SIGN UP FOR THE LOOP: Fortune launched a new newsletter on the business of sustainability called The Loop. You can check it out and sign up here.

VENTURE DEALS

– Grove Collaborative, a San Francisco-based company that sells natural household and personal care products, raised $150 million in Series D funding at a valuation of more than $1 billion. Lone Pine Capital, General Atlantic, and Glynn Capital co-led the round, and were joined by investors including Greenspring Associates, Norwest Venture Partners, Mayfield Fund, NextView Ventures, MHS Capital, and Heron Rock Capital.

– Happy Money, a Costa Mesa, Clif.-based fintech company to help customers save money, raised $70 million in Series D funding. CMFG Ventures led the round.

– BigID, a New York-based data-centric personal data privacy and protection company, raised $50 million in Series C funding. Bessemer Venture Partners led the round, and was joined by investors including SAP.io Fund, Comcast Ventures, Boldstart Ventures, Scale Venture Partners, ClearSky, and Salesforce Ventures.

– Olivela Inc, a San Francisco-based e-commerce company, raised $35 million in Series A funding. Morgan Stanley & Co. International led the round.

– Even Financial, a New York-based API for financial services search, acquisition, and monetization, raised $25 million in funding. Citi Ventures led the round, and was joined by investors including MassMutual Ventures,LendingClub, American Express Ventures, Canaan Partners, F-Prime Capital, GreatPoint Ventures, and Goldman Sachs.

– Cogito, a Draper, Utah-based relationship analytics software solutions, raised $20 million in funding. Investors include New York Life Ventures,Salesforce Ventures and Goldman Sachs Growth Equity.

– Gambling.com Group Plc, a Malta-based performance marketing company in the online – gambling industry, raised $15.5 million in funding, from Edison Partners.

– Fieldin, a Fresno, Calif.-based and Israel-based provider of a farm management platform, raised $12 million in funding. Zeev Ventures led the round.

– Health Recovery Solutions, a Hoboken, N.J.-based provider of a remote patient monitoring platform for health systems and home care agencies, raised $10 million in funding. Edison Partners led the round.

– Dapix Inc, the company behind the development of the FIO Protocol, raised $5.7 million in Series A funding. Binance Labs led the round.

– Aural Analytics Inc, a Scottsdale, Ariz.-based digital health company focused on building an advanced speech analytics platform, raised $4.3 million in funding. Morningside Ventures and Tamarisc Ventures led the round.